Op-ed | Don’t Shoot Down the U.S. Space Industrial Base

by and

The commercial satellite industry was pioneered in the United States, and the market was dominated by U.S. industry until Congress in 1999 enacted an ill-considered, draconian export control regime — which treated commercial satellites the same as munitions — and nearly decimated the industry. After the restrictions were put in place, the U.S. share of global satellite manufacturing dropped from 65 percent to as low as 30 percent, and the market share of U.S. launch service providers was also impacted adversely.

Now that we’ve had sensible export control reform for almost two years, our domestic industry is starting to get back on its feet. But another bad policy move could once again result in legislators shooting this vital industry down.

As reported by SpaceNews, American companies and thousands of workers are being harmed by Congress’ failure to reauthorize the Export-Import Bank of the United States (Ex-Im). Since July 1, Ex-Im has been unable to do what it has done for 81 years: provide loan guarantees to American exporters to help seal deals in cases when the private sector is unable or unwilling to assume credit risks.

Ex-Im’s being in limbo has already resulted in the Boeing Co. losing satellite sales to Asia Broadcast Satellite and Kacific, and of Orbital ATK losing a satellite sale to Azerbaijan. U.S. companies that use Ex-Im financing for commercial space launches — sometimes packaged with a U.S. satellite provider — are also vulnerable to the concerted campaign by a small group in Congress and their allies to block a vote to keep Ex-Im operating.

So what’s fueling the opposition to the bank, which for decades has consistently enjoyed strong bipartisan support? Regrettably, there are some in the House who seek to eliminate any “government role in the free market,” despite all the good institutions like Ex-Im do and despite the fact that all major trading nations, with the current exception of the United States, provide export loan financing or guarantees.

Ex-Im’s opponents are quick to discount the ramifications of their actions. Shortly after the bank’s authorization expired, Andy Koenig and Marc Short of the Freedom Partners Chamber of Commerce, one of the bank’s strongest foes, wrote in a Los Angeles Times op-ed, “All the hysterical predictions are wrong. The economy looks no different now than it did on June 30. Nor should anyone expect the economy to suffer from the bank’s expiration in the coming weeks, months and years.”

Really? Tell that to the workers at Boeing and Orbital ATK, and the workers from all the small- and medium-sized suppliers who labored so hard to make these commercial satellites and now are justifiably worried about the security of their jobs. Given the industry’s long lead times for purchase and delivery, we can expect the damage due to shuttering Ex-Im’s lending ability to intensify dramatically.

The foes of Ex-Im also use clever slogans to claim they are economic purists. But they fail to acknowledge the reality of how export financing works, especially in the commercial satellite and launch sector. The relatively unique nature of satellite projects — large, fixed, up-front costs; long payback periods; the risk of launch or on-orbit failure; and the fact the assets are up in space and by definition “inaccessible” — means this is a very specialized financing market. Because of these factors, satellite manufacturers and their customers can only access a small subset of the total pool of capital available in the markets. Support from Ex-Im helps offset some of these risks and allows a broader set of financiers to consider the market. Over the last four years, Ex-Im has supported $4.6 billion of U.S. satellite exports, representing 50 to 60 percent of overall exports in the space sector.

This campaign against Ex-Im has broader implications for the U.S. aerospace and defense industry and national security interests as well. American aerospace companies serve both the commercial and defense sectors and rely on overseas markets, particularly commercial markets serviced by Ex-Im loans, to keep the aerospace and defense industrial base healthy and offset the decline in U.S. defense spending. In the space sector, commercial export opportunities underpin the ability of the space industrial base to provide low-volume, high-technology, high-value solutions for our national security space requirements. Without Ex-Im, U.S. industrial production will decline, reducing revenue and jobs throughout the aerospace and defense supply chain, leading to higher unit costs and less funds for innovation for the military systems our armed forces depend on.

The folks on the other side of this issue believe they’ve found a target that has little public recognition and hence minimal grass-roots backing. But as people become more informed about the real world implications of shuttering Ex-Im, not only with the lost satellite sales but also with the potential loss of several jetliner sales, we’re confident there will be overwhelming demand for Congress to reauthorize Ex-Im without further delay.

Ex-Im financing is helping the commercial satellite and launch industry keep its competitiveness in our increasingly dynamic global marketplace, and is assuring the health of the space industrial base. Congress should act now to reopen Ex-Im’s doors and stop undermining one of our most dynamic industrial sectors.

David F. Melcher is the president and chief executive of the Aerospace Industries Association. Pierre Chao is a managing partner of Enlightenment Capital.